Ergodicity, state prices, and long bond returns

Anthony Tessitore; Nilufer Usmen

doi:10.1111/1467-9965.00046

Ergodicity, state prices, and long bond returns

Anthony Tessitore, Nilufer Usmen

Accounting and Finance

Research output: Contribution to journal › Article › peer-review

Abstract

We present an analysis of price systems in securities markets with infinitely many time periods and infinitely many uncertain states of the world. A key result is that a Markov price system (MPS) has a unique representation in terms of the returns on a known set of bonds. The result implies that securities prices are the discounted value of dividends, where discount factors are the reciprocal of the returns on a long-horizon discount bond.

Original language	English
Pages (from-to)	85-91
Number of pages	7
Journal	Mathematical Finance
Volume	8
Issue number	1
DOIs	https://doi.org/10.1111/1467-9965.00046
State	Published - 1 Jan 1998

Keywords

Ergodicity
Incomplete markets
Long bond returns
Markov process
State prices

Access to Document

10.1111/1467-9965.00046

Link to publication in Scopus

Fingerprint Dive into the research topics of 'Ergodicity, state prices, and long bond returns'. Together they form a unique fingerprint.

Cite this

@article{38160fbb23c745c683a07a1bdeb6be9c,

title = "Ergodicity, state prices, and long bond returns",

abstract = "We present an analysis of price systems in securities markets with infinitely many time periods and infinitely many uncertain states of the world. A key result is that a Markov price system (MPS) has a unique representation in terms of the returns on a known set of bonds. The result implies that securities prices are the discounted value of dividends, where discount factors are the reciprocal of the returns on a long-horizon discount bond.",

keywords = "Ergodicity, Incomplete markets, Long bond returns, Markov process, State prices",

author = "Anthony Tessitore and Nilufer Usmen",

year = "1998",

month = jan,

day = "1",

doi = "10.1111/1467-9965.00046",

language = "English",

volume = "8",

pages = "85--91",

journal = "Mathematical Finance",

issn = "0960-1627",

publisher = "Wiley-Blackwell Publishing Ltd",

number = "1",

}

TY - JOUR

T1 - Ergodicity, state prices, and long bond returns

AU - Tessitore, Anthony

AU - Usmen, Nilufer

PY - 1998/1/1

Y1 - 1998/1/1

N2 - We present an analysis of price systems in securities markets with infinitely many time periods and infinitely many uncertain states of the world. A key result is that a Markov price system (MPS) has a unique representation in terms of the returns on a known set of bonds. The result implies that securities prices are the discounted value of dividends, where discount factors are the reciprocal of the returns on a long-horizon discount bond.

AB - We present an analysis of price systems in securities markets with infinitely many time periods and infinitely many uncertain states of the world. A key result is that a Markov price system (MPS) has a unique representation in terms of the returns on a known set of bonds. The result implies that securities prices are the discounted value of dividends, where discount factors are the reciprocal of the returns on a long-horizon discount bond.

KW - Ergodicity

KW - Incomplete markets

KW - Long bond returns

KW - Markov process

KW - State prices

UR - http://www.scopus.com/inward/record.url?scp=0032221567&partnerID=8YFLogxK

U2 - 10.1111/1467-9965.00046

DO - 10.1111/1467-9965.00046

M3 - Article

AN - SCOPUS:0032221567

VL - 8

SP - 85

EP - 91

JO - Mathematical Finance

JF - Mathematical Finance

SN - 0960-1627

IS - 1

ER -